Pittman v. Sarpy County Bd. of Equalization
| Decision Date | 17 December 1999 |
| Docket Number | No. S-99-063.,S-99-063. |
| Citation | 258 Neb. 390,603 N.W.2d 447 |
| Court | Nebraska Supreme Court |
| Parties | Dan PITTMAN, Sarpy County Assessor, appellee, v. SARPY COUNTY BOARD OF EQUALIZATION, appellee, and Mercy Crestview Village, appellant. |
Jerry M. Slusky and Shaun M. James, of Gross & Welch, P.C., Omaha, for appellant.
Michael E. Thew, Deputy Lancaster County Attorney, Lincoln, for appellee Dan Pittman.
The Sarpy County Board of Equalization (county board) granted a property tax exemption to Mercy Crestview Village (Mercy) in 1998, against the recommendation of the Sarpy County assessor (assessor). The assessor then appealed the county board's decision to the Tax Equalization and Review Commission (TERC). TERC reversed the county board's decision to grant Mercy's property tax exemption and ordered the property placed on the county's tax rolls. Mercy now appeals. We removed this case to our docket pursuant to our power to regulate the Nebraska Court of Appeals' caseload and that of this court. See Neb.Rev.Stat. § 24-1106(3) (Reissue 1995).
In 1996, Mercy purchased an apartment complex in Sarpy County, Nebraska. Mercy, a nonprofit corporation, is ultimately sponsored by the Sisters of Mercy, a Catholic religious order. Mercy's mission is to "create and strengthen healthy communities through the provision of quality, affordable, service-enriched housing for individuals and families who are economically poor."
The apartment complex consists of 154 residential units. One unit is used as an office and another is used as a "network center." The network center is used to provide programs such as neighborhood watch, tutoring, computer classes, home ownership seminars, cancer awareness, and CPR classes. The network center is also used for social events and as a meeting place. Tenants are not required to participate in any of the services Mercy provides through the network center.
Mercy employs a service coordinator who meets with individual tenants to assess what programs or services would meet the needs of the tenants. The coordinator encourages tenants to participate in programs offered through the network center. The programs and services offered are constantly changing based on the specific needs of the tenants. Classes offered through the network center are generally taught by volunteers, and class materials are informational in nature. In October 1998, the network center was used 12 percent of the time (61 hours) for providing educational programs.
Persons applying to live at Mercy are subject to a credit check. Tenants must sign a lease and pay rent. Mercy has two low-income housing contracts with the Department of Housing and Urban Development (HUD), commonly referred to as "Section 8" and "Section 236" contracts. In order to qualify for HUD housing, a tenant's income must be at or below a certain level. Mercy sets a rental rate in compliance with HUD's requirements. Tenants of Section 8 units may receive a HUD subsidy. Tenants are subject to eviction for nonpayment of rent. There is no time limit on how long a tenant may reside at Mercy.
Mercy is self-supporting based on rent and rent subsidies. The property is expected to stand on its own financially. Any operating loss is covered by the "reserve for replacement" account, which is funded by Mercy's operating income. Mercy has never had to go beyond this reserve account to cover losses. However, if the reserve account would run short of covering a loss, Mercy would apply to HUD for a rent increase.
Mercy applied for a property tax exemption for the apartment complex in 1996 and 1997 based on Neb.Rev.Stat. § 77-202 (Cum.Supp.1998), which provides that property owned by educational, religious, charitable, or cemetery organizations used exclusively for educational, religious, charitable, or cemetery purposes is exempt from property taxes. The county board granted the exemptions for both years over the assessor's recommended denial.
In 1998, Mercy filed an affidavit of use for continued tax exemption in order to have its property tax exemption continued for 1998. The assessor recommended denial of the continued tax exemption for the reason that low income housing is not an exempt use of the property under § 77-202. However, the county board granted the continuing exemption for 1998. On June 10, 1998, the assessor appealed the county board's decision to approve Mercy's 1998 property tax exemption to TERC. On July 15, Mercy filed a motion to dismiss the assessor's appeal, claiming the assessor did not have standing to bring such an appeal based on Bemis v. Board of Equalization of Douglas County, 197 Neb. 175, 247 N.W.2d 447 (1976). In October 1998, the assessor requested, pursuant to Neb.Rev.Stat. § 77-5007.01 (Cum.Supp. 1998), to have counsel appointed to represent him. That request was granted. TERC overruled Mercy's motion to dismiss, finding that Bemis was no longer controlling due to the 1995 enactment of the Tax Equalization and Review Commission Act (TERCA), Neb.Rev.Stat. §§ 77-5001 through 77-5031 (Reissue 1996 & Cum.Supp.1998). TERC found that under §§ 77-5007 and 77-5007.01 of TERCA, the assessor had standing to appeal the county board's granting of the property tax exemption.
In December 1998, TERC held a hearing on the assessor's appeal. At the hearing, TERC received testimony and exhibits regarding Mercy's use of the property. TERC found that the predominant use of the property was to provide low-income housing and that thus, it was not exempt from taxation. TERC reversed the county board's decision and ordered the property returned to the tax rolls of Sarpy County. Mercy appeals.
Mercy claims, restated and summarized, that TERC erred in (1) finding the assessor had standing to bring the appeal, (2) incorrectly placing the burden of proof on Mercy to show entitlement to the tax exemption, (3) finding the assessor presented clear and convincing evidence to support denial of the tax exemption, and (4) finding that the county board's decision to grant the exemption was arbitrary and unreasonable.
Decisions rendered by TERC shall be reviewed by an appellate court for errors appearing on the record. § 77-5019(5). When reviewing a judgment for errors appearing on the record, the inquiry is whether the decision conforms to the law, is supported by competent evidence, and is neither arbitrary, capricious, nor unreasonable. US Ecology v. Boyd Cty. Bd. of Equal., 256 Neb. 7, 588 N.W.2d 575 (1999).
Mercy claims the assessor lacks standing to appeal the county board's granting of Mercy's tax exemption based on Bemis v. Board of Equalization of Douglas County, 197 Neb. 175, 247 N.W.2d 447 (1976), in which we held that a county assessor had no standing to bring an appeal of a tax exemption determination. At the time Bemis was decided, Neb.Rev.Stat. § 77-202.04 (Reissue 1976) provided:
Persons, corporations, or organizations denied exemption from taxation for real or tangible personal property ... by a county board of equalization may appeal de novo to the district court ... in the same manner and under the same procedure as provided by sections 77-1510 and 77-1511, in the case of appeals from other actions of a county board of equalization....
Also at the time of the Bemis decision, Neb.Rev.Stat. § 77-202.06 (Reissue 1976) provided:
The Tax Commissioner may review and reverse any decision of the county board of equalization granting tax exempt status for real or tangible personal property, including motor vehicles, but only after a hearing has been held by the Tax Commissioner in the county where the property exempted is situated, upon ten days' written notice to the applicant and to the county board of equalization. The Tax Commissioner shall within thirty days of the hearing certify his order to the applicant, the county assessor, and the county board of equalization.
In Bemis, we concluded that "the county assessor's responsibility is limited to an advisory rather than an adversary capacity" and that the assessor did not have standing to appeal a tax exemption determination. 197 Neb. at 177, 247 N.W.2d at 448. We stated that the assessor's remedy was not to prosecute an appeal but to bring the decision to the attention of the Tax Commissioner who could then review the decision as provided in § 77-202.06. Bemis, supra.
The statutory scheme regarding tax exemptions has changed since the Bemis decision. The Legislature adopted TERCA in 1995, which created TERC. See § 77-5003. Under TERCA, TERC was granted the power to hear appeals involving certain property tax matters, including decisions of a county board of equalization granting or denying tax-exempt status for real or personal property. § 77-5007(2).
After the adoption of TERCA, § 77-202.04(Cum.Supp.1998) was amended to provide:
Section 77-202.06 (Cum.Supp.1998) now provides:
The Property Tax Administrator shall adopt and promulgate rules and regulations governing tax-exempt status for real or tangible personal property. The Tax Equalization and Review Commission may review and reverse any decision of the county board of equalization granting tax-exempt status for real or tangible personal property but only after a hearing has been held by the commission, upon ten days' written notice to the applicant and to the county board of equalization. The commission shall within thirty days after the hearing mail an order to the applicant, the county assessor, and the county board of equalization....
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